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Inside Self-Storage Magazine 02/2001: Orlando, Fla.

Editor's note: The Market Profile, a new addition to Inside
Self-Storage, will focus each month on the state of self-storage
development in a unique geographical area. Suggestions for "hot spots"
to be examined should be sent to rk@realestateinvestor.org.

I have
seen very few markets like Orlando, Fla. I recently had occasion to study the
city's east side. Typically, in a three- to five-mile radius of a market I find
10 to 12 competitors, with three or four new sites in the works. Surprisingly,
my radius search of Orlando found 22 competitors, and I quit logging potential
new sites at the 34 mark.

One fact is certain about Orlando: There are some great competitors in the
market. All of the major players have set up shop--Public Storage, Storage USA
(which is just getting its feet wet), Shurgard, Personal Mini Storage and Stor-All.
A few years back, I visited a conversion Mike Carter Construction was doing
there for Public Storage. Market sophistication was increasing with each new
store design. Since then, the multistory, climate-controlled, state-of-the-art
facility has become commonplace. Let's see what a few of the Orlando locals have
to say about the market...

Mike Mikkelson, a development partner with Shurgard, comments:

Orlando
is experiencing a softness in occupancies. Our year-to-date occupancy report
shows we are down from an average of 83 percent to 73 percent from the previous
year. I attribute this to a tremendous increase in new facilities constructed
over the past several years. I don't know what is motivating developers to
continue flooding this market with product. The new projects are being absorbed
at slower-than-projected levels, and sometimes at lower rates than projected.
We've seen some new facilities sit at 50 percent to 55 percent from year one to
year two, while other new ones have been opened for more than three years and
have not surpassed the 75 percent to 80 percent mark.

I also spoke with Marc M. Smith of Shader Brothers Corp., which operates as
Personal Mini Storage among other names. Shader Brothers manages 30 locations in
Florida, with 24 in the Greater Orlando area, and has developed four locations
in the last three years. Smith has lived in the Orlando area for 12 years and
his wife, Laurie, is an Orlando native. They both understand this market very
well. According to Smith:

Occupancies are softer than they have been in the past. Increased
competition has definitely hurt overall occupancies and has restricted
rental-rate increases in most of the Greater Orlando market. We continue to see
development of new projects, which, in my mind, means occupancy growth and
increased rents per square foot are going to be many months away. As to
eastern Orlando, Smith says, There has been a high concentration of
population growth, as well as self-storage development. Some of the softest
submarkets in the Greater Orlando market are in eastern Orange County.

As a whole, the market is still expanding. There is rapid growth in a
number of areas (primarily east and west). Certain areas are being overbuilt,
such as the University of Central Florida (UCF) and Kissimmee area. There have
been five new projects in the UCF area in the last three to five months. The
Kissimmee area is experiencing occupancy in the mid to low 80th percentile down
from the high 80s to low 90s. It seems people (developers) are not spending
enough time at the local municipalities checking with planning, zoning and
building departments to determine what is in the pipeline for new projects.

Larry Anderson of Stor-All has been developing in Orlando for the last three
years. He shares his views:

Stor-All has always tried to select locations in niche markets--gaps where
there is limited competition. Our first project in Orlando, on Goldenrod, was
not an "A" location, but we purchased a project with entitlements in
place, which gave us speed to market. From there, we chose a site in Longwood
that has superior exposure compared to the competitors. We looked near Kirk
Road, but there was too much activity at that location. We chose a site in
Oviedo that is several miles from competition in either direction, and in close
proximity to the mall and big box retailers. We are very excited about our UCF
location, with its proximity to shopping, apartments and the university. We may
be the only self-storage facility on University Drive--exactly the kind of niche
location Stor-All seeks. We have looked at several other opportunities, but feel
we are going to hold with what we have (unless something really spectacular
comes along).

Overall, my assessment is that Orlando--particularly eastern Orlando--appears
overbuilt. I looked for pockets of opportunity and simply did not see many
"A" sites available. There is a lot of population growth, and it seems
the supply is slightly outpacing the demand. Look for more favorable market
conditions in the next few years if building slows down a little.

RK Kliebenstein of Coast-To-Coast Storage, Boca Raton, Fla., provides
feasibility studies and market analyses for self-storage projects, in addition
to financing and consulting with self-storage owners. A well-known author and
speaker to the industry, Mr. Kliebenstein will be sharing his market expertise
with Inside Self Storage readers. He may be contacted at 561.367.9241.